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Weekly Update

Market Summary

Equity markets had one of their worst weeks of the year last week with U.S. equity indices marking their lowest points since the first half of the year. For the week, the Dow Jones closed down -4.4%, the NASDAQ slid -4.3%, and the S&P 500 lost -3.8%. The sell-off came despite limited new economic data and light trading volume due to Thanksgiving, which closed U.S. equity markets all day on Thursday and part of the day Friday. However, oil markets continued to fall, which has increased concerns of peaking global growth. Investors are hoping for some reprieve to the recent equity slide in the week ahead, which will have a busy schedule of economic data and macro events like the meeting between President Trump and China’s President Xi at the G20 Summit on Friday and Saturday.

Energy companies helped drive equities lower this past week as the price of crude oil dropped to its lowest level in more than a year, reflecting concerns that a slowing global economy could hurt demand for oil. The benchmark US crude contract fell 7.7% to $50.42 per barrel in New York, the lowest since October 2017. Brent crude, the international standard, lost 6.1% to close at $58.80 per barrel in London. OPEC members have signaled a willingness to lower production at the cartel’s next meeting in December. However, the Trump Administration has been pressuring OPEC to not cut production, a move that could push prices even lower. Low oil prices can benefit consumer discretionary budgets and boost profit margins for non-energy manufacturers, but also hurt the burgeoning U.S. energy industry and its stakeholders.

Traders have also been weighing the approval of the proposed Brexit strategy by the European Union. The E.U. signed off on the deal this weekend, though it is unclear whether the British parliament will be able to pass the deal due to concerns over the concessions that Britain will have to make in its economic separation.

Looking to the week ahead, the spotlight will primarily be on the trade meeting between Presidents Trump and Xi on the sidelines of the G20 Summit. Many investors are hopeful of at least a temporary ceasefire between the U.S. and China in the current trade conflict as a result of the meeting. Additionally, several Federal Reserve officials will give speeches on the current state of the economy this week, which may lend insight into the future path of interest rates and whether the recent market turmoil has had any effect on the Fed’s judgment.

Economic Highlights: 

Durable Goods: Durable goods orders fell 4.4% month-over-month in October, which was the largest monthly drop in over a year and almost double the consensus expectations. The weakness was primarily attributed to the volatile aircraft and defense segment. Declining durable goods orders may be an indication of declining capital investment.

Employment: Initial jobless claims, a measure of layoffs across the U.S., jumped unexpectedly to 224,000 for the week ending November 17th. This was the highest level since June.

US Economy – The Week Ahead

Tuesday 11/27/2018

  • S&P/Case-Shiller Home Price Index Year-over-Year Growth – Consensus Estimate: 5.3%, Prior Month: 5.5%

Wednesday 11/28/2018

  • U.S. Third Quarter GDP Growth Year-over-Year (Second Preliminary) – Consensus Estimate: 3.0% (3.5% QoQ), Prior Quarter: 2.9% (4.2% QoQ)
  • New Home Sales – Consensus Estimate: 580K (4.9% MoM), Prior Month: 553K (-12.1% MoM)
  • Wholesale Inventories Month-over-Month Growth – Consensus Estimate: 0.4%, Prior Month: 0.4%

Thursday 11/29/2018

  • Federal Reserve Open Market Committee (FOMC) November meeting notes released
  • Initial Jobless Claims – Consensus Estimate: 220,000 (-1.8% WoW), Prior Week: 224,000 (3.7% WoW)
  • Pending Home Sales Index – Consensus Estimate: 104.8 (0.2.% MoM), Prior Month: 104.6 (0.4% MoM)
  • Personal Consumption Expenditure (PCE) Index Year-over-Year – Consensus Estimate: 2.1%, Prior Month: 2.0%

Friday 11/30/2018

  • No Data
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